ELECTRONIC PAYMENT SYSTEM AND FINANCIAL

PEFORMANCE OF COMMERCIAL BANKS IN RWANDA

A CASE OF BANK OF KIGALI

RUTAZA Wilson

MBA/2176/11

A Dissertation Submitted in the Partial Fulfilment for the Degree of

Masters of Business Administration and Management

(Finance and Accounting Option) of Mount Kenya University

OCTOBER 2019

i
 DECLARATION

I proclaim that this thesis is a presentation of my original work and that the contribution

of others has been cited in this research.

This work should be only reproduced upon the consent of the author or by approval

Mount Kenya University

Student’s name: Wilson RUTAZA

MBA/2176/11

Signature------------------------------------- DATE -----------------------------------

Declaration of the supervisor

Name: Dr. BOGERE

Signature-------------------------------------- DATE--------------------------------------------------

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 DEDICATION

I mostly dedicate this Thesis to my beloved wife MUKANOHERI Christine who have

tirelessly and generously supported me financially and morally during my studies

ii
 ACKNOWLEDGEMENTS

This work would not be possible if done single handled. Therefore, I want to thank every

who stood with me during this period of academic and above all, more thanks goes to the

creator for his protection.

I wish to recognise and appreciate the support of my supervisor DR. BOGERE whose

guidance, suggestion and patience was enormous and inspirational despite his busy

schedule.

I want to thank the management of Mount Kenya University Kigali Campus especially

lecturers in Finance and Accounting Option for their contribution towards my studies.

More thanks to my colleagues and many other friends who helped to get this work

completed.

May God bless you all.

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 ABSTRACT

Electronic Payments systems is regarded as the use of electronic and telecommunication

devices that is used to provide wide range of services by providing various products and
services to the bank customers like credit cards, Mobile banking, use of credit cards, and
other electronic devices that facilitates transfer of funds. The study was conducted on the
assessment of the effect of electronic payment system towards the financial Performance
of Bank of Kigali. The overall purpose of the study was to examine the extent to which
electronic payment system affect the financial performance of commercial banks with BK
as case of the study. The study was meant for the following specific objectives:
Assessment of mobile payment system on profitability of bank of Kigali the second one is
to examine the effect of internet payments on the capital adequacy of bank of Kigali and
third one the assessment of ATM machines on the liquidity position of the bank of Kigali
and lastly, assessment of the role of electronic cards on risk assessment of Bank of Kigali.
The research covered a period ranging from 2013 to 2019. During data collection the
researcher used both primary and secondary data sources. Questionnaires were designed
to assist obtain primary data. and interview guide administered to the sampled population
which was the staff and customers of bank of Kigali Head office. The data processing,
tabulation and editing was done with the use of SPSS and Ms excel. The targeted
population of this study was equal to 120 persons and the sample population of this study
is equal to 92 respondents. The findings of the study is of much significance to the
researcher as it helped him in understanding the contribution of electronic payment
system towards the performance of commercial banks in Rwanda , To The institutions of
the higher learning, The finding of this research added to the existing resources of the
University, to other researchers as the findings of this study contributed other researchers
interested in this area to have the relevant literature on the electronic payment, To the
Management of Bank of Kigali, the research contributed to understand how various
electronic payment system perform in relation to the overall bank performance and take
some recommendation on improving the bank performance and satisfy the needs of
customers. The overall findings of the study revealed that electronic performance
contributes significantly to performance of commercial banks .

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 TABLE OF CONTENTS

DECLARATION................................................................................................................. i

DEDICATION....................................................................................................................ii

ACKNOWLEDGEMENTS .............................................................................................iii

ABSTRACT ....................................................................................................................... iv

TABLE OF CONTENTS .................................................................................................. v

LIST OF TABLES ............................................................................................................ ix

LIST OF FIGURES ........................................................................................................... x

LIST OF ABBREVIATIONS AND ACRONYMS ........................................................ xi

DEFINITION OF KEY TERMS ....................................................................................xii

CHAPTER: INTRODUCTION........................................................................................ 1

1.0 Introduction ............................................................................................................................ 1

1.1Study Background.................................................................................................................... 1

1.2. Problematic Statement......................................................................................................... 3

1.3 The Study objectives............................................................................................................... 4

1.3.1 General Research objective ............................................................................................. 4

1.3.2 Research specific objectives ............................................................................................ 4

1.4 Research Questions .......................................................................................................... 4

1.5 Relevance of the Research ..................................................................................................... 5

1.6 Study limitations ..................................................................................................................... 6

1.7 Scope of study. ....................................................................................................................... 6

1.7.1 Conceptual scope ............................................................................................................. 6

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 1.7.2 Geographical scope ......................................................................................................... 6

1.7.3 Time frame ...................................................................................................................... 7

1.8 Organizational structure......................................................................................................... 7

CHAPTER TWO: REVIEW OF RELATED LITERATURE ...................................... 8

2.0 Introduction ............................................................................................................................ 8

2.1 Theoretical Literature ............................................................................................................. 8

2.1.1 Technological acceptance Model .................................................................................... 8

2.1.2 Innovation Diffusion Theory ........................................................................................... 9

2.1.3 Task-Technology Fit (TTF) Theory. ............................................................................. 11

2.1.4 Diagram/schematic of theory......................................................................................... 11

2.1.5. Delone and Mclean IS success model ......................................................................... 12

2.1.6 Definitions of E- Payments systems .............................................................................. 13

2.1.7 Electronic Payment Modes ............................................................................................ 15

2.1.8 Bank Results .................................................................................................................. 21

2.1.10 Challenges Banks Face Through Electronic Payments ............................................... 26

2.2 Empirical review ................................................................................................................... 29

2.3 Critical review and gap in the literature ............................................................................... 31

2.4 Conceptual frame work ........................................................................................................ 33

CHAPTER THREE: RESEARCH METHODOLOGY ............................................. 34

3.0 Introduction .......................................................................................................................... 34

3.1 Research Design ................................................................................................................... 34

3.2 Target population ................................................................................................................. 34

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 3.3 Sampling techniques ............................................................................................................ 35

3.4 Data Collection Methods ...................................................................................................... 36

3.4.1 Instruments used in Data collection............................................................................... 37

3.4.2 Questionnaire................................................................................................................. 37

3.4.3 Interview guide .............................................................................................................. 37

3.5 Data analysis Procedure ....................................................................................................... 37

3.6 Reliability and Validity of the research................................................................................. 38

3.7 Ethical consideration ............................................................................................................ 39

CHAPTER FOUR: RESEARCH FINDINGS AND DISCUSSIONS ......................... 40

4.1 Introduction .......................................................................................................................... 40

4.2 Responsive rate of respondents ........................................................................................... 40

4.3 Demographic Information of the respondents .................................................................... 40

4.3.1. Respondents by gender ................................................................................................ 40

4.4 Mobile Banking and the Customer deposits of BK ............................................................... 43

4.4.1 Contributions of internet banking on Financial performance of BK ............................. 46

4.5 Contributions of electronic payment in promoting bank efficiency .................................... 47

4.6 Significant of electronic payment systems on financial performance of the bank .............. 49

CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATONS ..... 52

5.1 Introduction .......................................................................................................................... 52

5.2 Summary of key findings ................................................................................................ 52

5.2.1 Mobile banking and customer deposits of BK .............................................................. 52

5.2.2 Point of sale on asset turnover ....................................................................................... 52

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 5.2.3. Electronic cards like ATMs and liquidity position of BK ............................................ 53

5.2.4. Electronic cards and Bank Efficiency .......................................................................... 53

5.3 Conclusion ............................................................................................................................ 55

5.4 Recommendation ................................................................................................................. 56

REFERENCE ................................................................................................................... 58

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 LIST OF TABLES

Table 4.1: Respondents according to gender ..................................................................... 40

Table 4.3: Educational qualification .................................................................................. 41

Table 4.4: Experience working in the bank ....................................................................... 42

Table 4.5: Mobile payments on customer deposits ............................................................ 43

Table 4.6: Point of sales on Asset turnover ..................................................................... 44

Table 4.7: Internet banking and Liquidity position. ....................................................... 44

Table 4.8: Electronic payment systems ( cards) and bank efficiency ............................... 45

Table 4.9: Descriptive Statistics showing the magnitude of use by clients ....................... 46

Table 4.10: Descriptive Statistics showing the effectiveness of electronic banking ......... 48

Table 4.11: Significance contributions of E–payment on Financial Performance ........... 49

Table 4.12: Correlations between Electronic payment and its performance ..................... 50

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 LIST OF FIGURES

Figure 2.1: Innovation Diffusion Theory ........................................................................... 10

Figure 2.2: Diagram/schematic of theory .......................................................................... 11

Figure 2.3 Diagram/Schematic of theory. .......................................................................... 12

Figure 2.4: Conceptual framework .................................................................................... 33

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 LIST OF ABBREVIATIONS AND ACRONYMS

ACH: Automated Clearing House

ATM: Automated teller Machine

B2B: Business to Business

B2C: Business to consumer

BK: Bank of Kigali

BNR: National bank of Rwanda

C2B: Customer to Business

C2C: Consumer to Consumer

EFT/POS: Electronic Fund Transfer at point of sale

EPS: Electronic Payment System

ICT: Information communication Technology

P2P: Person to Person

PC: Personal computer

SIMTEL: SocietyInterbancaire de Montique et de Telecompansation au Rwanda

SMS: Short Messaging System

TAM: Technological Acceptance Model

TTF: Task Technology Fit

US: United States

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 DEFINITION OF KEY TERMS

Electronic Payment System: According to the researcher electronic payment include:

Mobile payment system, internet payments, and electronic card payments

Financial Performance

Financial performance includes the following: profitability, capital adequacy, liquidity,

Risk assessment and asset quality.

xii
CHAPTER: INTRODUCTION

1.0 Introduction

First part deals with the fundamental information about the research which include: The

Background of the research, the problematic statement that instigated the researcher to

conduct this study, the overall general purpose of the study that the researcher is aiming

at, research questions adopted by the researcher, the relevancy of the research, the scope

of the study and the challenges encountered by the researcher during entire research

process.

1.1Study Background

Globalisation in current situation is as the result of innovative technological

advancements. The technological advancement has affected the style of payment

systems changing from traditional towards electronic World (Ogini,2013). Current

changes due to Innovation has changed from traditional style of handling huge

amount of cash to a more organised payment system which is reliable and is free

from risk and cash related disorders. The efficiency of implementing financial

transactions has increased and it regarded as faster and accurate compared to

traditional means, in comparison to other components it has put e- payment system

in the best position than paper money.

The e-payments is considered as the method of exchange in electronic commerce

where the value is transferred through information and communication technologies

networks (ICT). The Electronic Payment system has progressed from traditional

payment system to current electronic payment system and consequently two Modes

of electronic payments have much in common. The electronic payment system is

much better because of using advanced techniques in security that has no analogy to

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traditional payment system (Donalo’mahony,2001)

This payment method was considered as the one that provides safety and convenience of

transactions and therefore contributes to a number of economic benefits like Mobilising

enough deposits and savings, increases the availability of cash in the banks and this and

hence allowing borrowers both business and individuals have accessibility to the funds

Ann cobb (2004).

The modes of Electronic payments enable financial institutions and banks to monitor the

individual spending habits and be able to design their products and eventually effective

monitoring of individual spending patterns. This will also be useful to the government in

undertaking its regulatory role of economic regulation (Ann Cobb,2004).

During the 1990s, some few African countries had started to establish and develop

procedures that will enhance electronic retail payment. Since the establishment of

technology more opportunities were created to facilitate the payment system and

enhancing the security of transactions between the individuals and organisations and

finally effectiveness of electronic payment system. The advanced networked information

technology has done more good than harm especially in lowering computing costs this

has helped may firms towards adopting paper less electronic commerce (Kassie, 2012).

According to Edfy (2000), Customer satisfaction is the way in which the business ensures

loyalty of its customers and make sure that clients are happy enjoying services given to

them and hence in long run improve the retention of customers.

Nigel Hill and al (2008), defines customer satisfaction as the way in which business

community ensures that the services provided to customers meet their expectations in

quantitatively and qualitatively of terms of product and services. In Rwanda, a number of

2
electronic payments forms have been established across banking sector like establishment

of ATM machines to allow quick service delivery other common electronic payment

include point of sale terminals, deposing ATMs mob serve tax online.

1.2. Problematic Statement

Over the number of years, The World experienced the change and progression in the

payment systems from the period of barter trade to the period of bank notes, payment

orders and finally the period which is associated with the use of electronic payment tools

such as the use of debit and credit cards to effect settlement of suppliers invoices.

(Asokan,et.al,2000), and hence evolved to the establishment of numerous electronic

payment tools that facilitates the business to take place on the internet.

According to the information contained in the report issued by the central bank of

Rwanda (NBR 2012), there was notable delays in the settlement of checks between

banks, long time and waiting time in queues as people takes a lot of time to be served,

numerous errors which was as the result of manual work and consequently the fraud cases

were increasing. This resulted to bank to take precautionary measures avert this situation.

It is from this context that convinced the researcher to examine the role played by

electronic payment methods on the Financial performance of BK. Because researcher

believes that the establishment and implementation of electronic payment system can

facilitate the banking transactions and relieve customers from the burden caused by

traditional mode of payment system. The experience from the developed countries is that

during the adoption and implementation electronic payments many banks were unable to

adopt to the new changes this was evidenced by increased queues in banking halls,

customers were still carrying huge amount of cash all those issues indicates that bank

customers and employees were not happy with the services. However, banks have tried to

3
improve their systems by building infrastructures and new services like observe

to increase customer satisfaction but these problems persisted. This was probably due to

increasing problems associated with electronic payment systems this was according to

Bwonditi (2010) who observed several complaints by customers about the services

mostly ATM’s That stopping payment, reversing transaction and refund was difficult

and hardly do people talk about these services and therefore the research came out to

understand the extent to which electronic payments have an effect on the overall financial

results of the bank remains the problem of the study.

1.3 The Study objectives

This research was conducted to be able to attain the objectives given below:

1.3.1 General Research objective

The overall motive of this research was to determine the extent to which electronic

payment methods affect Financial performance of Bank of Kigali.

1.3.2 Research specific objectives

The study entitled to achieve the following research objectives:

i. To assess the effects of Mobile banking on customer deposits of BK

ii. To analyse the effect of point of sales on asset turnover of the Bk

iii. To examine the effects of the internet banking on liquidity

position of the bank.

iv. To Analyse the impact of electronic card on promoting bank efficiency

1.4 Research Questions

i. Does Mobile banking system affect the customer deposits of BK?

4
 ii. Does point of sale affect Asset turnover of BK?

iii. What are the effects of the internet banking on liquidity position of BK
Rwanda?

iv. What are the effects of electronic cards on promoting bank efficiency?

1.5 Relevance of the Research

The research finding will be of great importance in the following ways the following

ways:

On the researcher’s side, the findings from this research study will be of much

significance to the researcher to thoroughly understand the contribution of Electronic

payment towards the Financial Performance of commercial banks of Rwanda with

emphasis on Bank of Kigali as a case study.

To institutions of higher learning: the outcomes from this research study will be of much

significance to institutions of higher learning since this will be added to existing resources

of the university,

To other researchers: The findings from this study will be of much significance to other

researcher since the finding from this and serve research study will be added to existing

literature and serve as valuable guideline

To the management of Bank of Kigali: The findings will enable the management of bank

of Kigali to rank different electronic payment modes according to their performance and

understand their contribution to the overall performance of the Bank of Kigali

5
1.6 Study limitations

Different hindrances were met by the researcher during the entire research process but the

research has tried to suggest possible solutions to overcome them so as to conduct the

research as planned.

The first expected limitation is the reluctance of some respondent for answering

questionnaires, and the fact of not showing required cooperation in responding to the

questionnaire. To overcome this, the researcher distributed question with an introductory

letter, identify who he is, his school and the purpose of the research.

The second expected limitation was the drawback. For example, in case where the

appointment with the management of Bank of Kigali was postponed to the date where

less office work; this brought inconvenience in scheduling especially when he / she give

the same appointment with the IT department. However, the researcher opted to work on

Friday.

1.7 Scope of study.

In order to address issues of time and resource impediments, the researcher adopted the

scope of the study as given below.

1.7.1 Conceptual scope

Conceptually, this study focused on assessing the extent at which Electronic Payment

system impacts on the general financial results of commercial banks and BK as case of

the study.

1.7.2 Geographical scope

This research study was conducted in Bank of Kigali located in Nyarugenge district of

Kigali city.

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1.7.3 Time frame

The research study covered the period ranging between the years 2013-2018

1.8 Organizational structure

The reason for the organisation of the study is provide the road map that may help leaders

to read and understand the contents of the dissertation it is the summary of how research

is arranged indicating points follows each other. It briefly shows how the research is

constructed to successfully bring the objectives of research.

In the context of this study this dissertation is presented and displayed into five chapters

as elaborated below:

The first chapter consists of the general information about the research, problematic

statement, reasons why the study was conducted, relevancy of the study to various users

and finally the arrangement and organisation structure of research work.

Second chapter is concerned with the Definitions of key terms and concepts used in the

research related to the topic under investigation. It also consults all literature reviews in

relation to the topic and other documents related to the topic under research.

Third chapter includes the work design and methodology used by the researcher in

achieving his research objectives. It focused on the study design, Target population,

sample design, instruments and tools of gathering information from the field and

summarising information gathered inform of tables.

The fourth part deals with presentation of analysed data into a meaning full structure and

then interpret data for decision makers

Finally, the fifth chapter involves conclusions and recommendations.

7
 CHAPTER TWO: REVIEW OF RELATED LITERATURE

2.0 Introduction

This section intends to review the empirical literature on Electronic payment system with

Financial performance of commercial banks, these electronic payment systems includes

ATMs, point of sale, electronic cards, electronic wallets and look at their contribution

towards the performance of Bank of Kigali. This part emphasises on the important terms

and concepts written in conjunction with electronic payment system and Financial

Performance of commercial banks Rwanda. It also includes conceptual frame work and

various models used. Finally, the chapter concluded by showing where this research fits,

and identifying the gap to be considered after this research.

2.1 Theoretical Literature

Analysis of the literature covers all scientific data in the field specified by the authors.

Much of this is usually achieved by reference to previous publications or reviews. In this

way it is necessary to review all past or previous materials but recent studies and

publications should be included, the quantity and quality of analysis analysed may differ

from one to another and from few to another. (Ahorony and Swary,1981)

2.1.1 Technological acceptance Model

It regarded as one of the most commonly model that was linked to the electronic payment

system, it includes Innovation, acceptance and use of new technologies that influences the

performance of organisation and individuals and customer’s services being easy and fast.,

For Example focusing on Technological issues (Davis 1989) and improving technological

acceptance model (TAM). This theory deals with individual behavioural intentions and

how they apply ICT to solve their problems on daily basis. TAM suggests that the

conduct of some body is influenced by his intentions to use the information

8
communication technology and ultimately affect the user's height in terms of perception

of the usage of technology and its impact on the use. On the other hand, the usage will

depend on the attitude and flexibility in terms of use. When using the Theory, the

requirements regarding how it is easy to use should be recognised (Pederson, Leif,

Methlie and Thorbjornsen,2002)

According to this Theoretical view, two issues are critical, which is the user’s attitudes

and how the service can guarantee the ease of use Davis(1989: 1993) and therefore

,agrees that it is very crucial to evaluate the user requirements as perceived usability

function and ease of use. The theory discussed above was criticised that it takes into the

consideration that technological aspects alone has influence on users however other

aspects which include social aspects can also be affect people. practically, some other

challenges like time constraints, organisational constraints, aspects of environment can

also affect technological acceptance.

2.1.2 Innovation Diffusion Theory

This diffusion of innovation is considered as most widely used model in technological

world for organizational and individual analysis. This theory brings a number of factors

that can have impact or affect diffusion of innovation. The first explains how all

technological innovations pass from one level of invention to the wide spread use or not

Rogers (2003) , the innovations will be useful it provides a relative which is the level in

which technological innovations provides some improvements over the existing, in

harmony with the social practices and beliefs among the users, in terms of complexity

which is easy to learn, training opportunity which is ability to provide experiment with

innovation before the use, and the level to which the results of technology are beneficial

9
and clearly visible .these issues do not depend on each other and therefore it’s not easy to

predict the speed or diffusion.

Dissemination research has shown that innovation that offers advantages comparability

with the current practices and norms, limited training skills and the observability are more

likely to spread easier and faster than innovations with a set of reciprocity features Dillon

and Morris, (1996)

According to Rogers ( 2003), people introducing a recent invention have to pass through

any of the following categories according to the adoption rate: innovators, early adopters,

early majority, late majority and delayed, as schematically shown in the figure below.

Early Early Late

Innovators Laggard
Adopters Majority Majority

Figure 2.1: Innovation Diffusion Theory

Source: Rogers (2003)

The first users have a disproportionate impact on the implementation of any technology

Dillon and Morris (1996). Information and communication technology (ICT),

specifically in the acceptance of electronic payments, this theory justifies establishing an

extended time needed to enable the users to comprehend and verify how technological

perspectives applies to the real life and its justification in the theory of usability to

establish an extended time so that people can know how apply technology in their

10
operations and how useful it is taking their decisions , it can lead to training, models and

demonstrations that can increase the use of innovations such as electronic payment

systems.

2.1.3 Task-Technology Fit (TTF) Theory.

It is believed that this theory has an influence on individual results and is used when ICT

capabilities cancel the tasks that the user must perform (Good and Thompson,1995). He

suggests several factors that measure the adaption and implementation the of task

technology. These factors include quality, location, authorisation, comparability, the

flexibility of use or how can easily learn through training, Production schedules, system

reliability and user relationships. This model is very significant to analyse different

perspectives of various IT systems, including advanced payment systems which has

facilitated the electronic commerce and this is used to complement to other models like

the technological acceptance model.

2.1.4 Diagram/schematic of theory

Figure 2.2: Diagram/schematic of theory

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2.1.5. Delone and Mclean IS success model

This theory puts forward ways of evaluating information systems, the new version of this

model covers six perspectives that lead to the favourable result of the information system

and indicates all these features are interrelated. these features include system and quality

of the service, the intention to use, the customer satisfaction and net benefits realised as

the result of using the system. some benefits will be obtained and they can be either

positive or negative. The fundamental issue here is that all six dimensions are interrelated

and the arrows shown on the diagram below shows the interrelations between the

dimensions and hence has impact towards customers in terms of how customers are

satisfied with the services and its subsequent use on information system. Delone & Mc

Lean (2002,2003)

Figure 2.3 Diagram/Schematic of theory.

Success model of updated computer systems (Delone and McLean 2002, 2003)

From the first theories we can agree that different perspectives were used to comprehend

the application of technology and its impact on the user performance. The theories and

models explain how ICT innovations and their implementation would have the significant

impact on the performance of individuals and organisations.

12
For example, TAM theory ignores some sufficient considerations about the advantages of

user expectations. Pedersen, Methlie and Thorbjornsen (2002). The application of

Technological acceptance model and use of electronic payments should emphasise the

fact that the usefulness of instruments is not sufficient to suggest wide spread and

adoption of services to various end users and the discrepancy between the expectations

communicated and the user perceptions can have adverse impact on the users. A long

approach in these services is due to the delay in adaption and the use of services for end

users (ibdi).

Users should be considered as the technology users but electronic payment work in the

context of consumption, which requires services information on Board.

The utility value is practical and guarantees effect product results and this include the

Values of Convenience, Economy, and quality are considered as important tools. But this

is also associated with number of issues such as relevance, problem prevention,

availability or compliance with local context. These issues are connected with electronic

payment system like ATM machines and point of sale (POS). in terms of economic

value, the associated economic benefits offered include by saving in purchases, by

gaining from low prices that are due minimal costs associated with the electronic

payments and hence provide a long term impact on the family budget or the general

economy and is of fundamental importance to the users (Boztepe 2007)

According to this theory the users of the electronic system are the only users of
technology: both consumers and social beings. Therefore, an important investigation is
research that attempts to include these factors in efforts to promote, use and adopt
technological innovations such as the use of electronic payment systems.

2.1.6 Definitions of E- Payments systems

The studies on electronic payment shows that no standard definition of Electronic

payment system, some authors have come up with different definitions, according to

13
Humphreyetal (2001), Electronic payment is effective and related transactions are

performed or paid with the use of internet. It usually involves the use of digital devices

and networks use to provide services to the people. This signifies the use of internet

sources and digital computerised system. The system makes it possible to settle the

invoices without going to face the bank.

Vassiliou (2004), regarded e-payment to be made as result of exchange of financial

transactions between buyers and sellers.

The research conducted by cobb (2004) revealed that electronic payments system is not

only attributed to convenience and card security but also contributes more to the overall

development of the country.

The E-payment system deals with tools like credit cards, debit cards, electronic credit

transfers or effecting payments using other electronic means contrary to the use of cash or

checks. Agimo (2004). It was regarded as the transfer from one who pays to the one who

is paid the transfer may be made by the payer of a claim relating to follow-up of a party

accepted by the beneficiary.

Kalakota and Whinston (1997, E-payment system is considered as the mode of financial

exchange that occurs in exchange of the services made by buyers and sellers or between

service providers and receivers. The content in this case of exchange is usually

information about Digital Financial Instruments such as encrypted credit card numbers,

electronic checks or digital money guaranteed by a bank or legal currency.

According to Ribbers and Heck 2004, The development of new modes of business

relationships and business theories in the domain of Electronic payments has resulted in

the need for new forms of money exchange that are considered as electronic payments,

14
these include online transactions, payments between people by use of electronic means,

personal payment systems allow on line transfers between people.

The research conducted by ( Fiallos and wu) reveals that increase of invention of internet

facilitated the need to use advanced payment methods to reduce threats involved in

carrying large amount of funds . customers could easily buy various products with the use

of internet which was the most secure way of business. In addition to the above the

online payment schemes were developed as customers increased trust and security.

2.1.7 Electronic Payment Modes

The modern payments system was developed in Rwanda and is increasing in terms of

adoption and implementation. Various research indicates that the trend at which

electronic payment tools grow in various countries will continue to increase at increasing

rate and for the foreseeable Future. Deutche Bank Research (2001)), Vartanian (2000)

and Birch (1998), analysed the trend of future payment systems with introduction of e-

payment.

A number of people addressed the problem electronic payments in their research. Among

other include: Ferguson (2000), Malek (2001), Bank for International settlement (2000),

Mester (2000) and information technology outlook (2000), have advanced various aspects

on this study. Hunter, 1991; Yasuharu, 2003). Advanced his view that electronic

payments improve mobilisation of savings and financial intermediation. Cash less

payments are efficient and reliable systems that facilitates development of every economy

(Annon, 2003).

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2.1.7.1 Automated Teller Machine (ATM)

It is automated telecommunication device connected with a secure cash register and cash

register system. Enabling customers to enter the bank ATM machine by using personal

identification by inserting into the machine. Rose (1999). Mainly located at places that

attracts many people like at the airports, shopping centers and locations outside the

national banking offices, offering customers various retail banking services, reducing the

burden on ATMs. First presented as an ATM, it offers numerous products and services

which is not limited to making deposits, fund transfers across two or more accounts plus

paying bills like electricity and water. Abor (2004) Today, ATMs offer payment solutions

that allow customers to pay with plastic, as it is a requirement for current business

owners. Providing a reliable electronic payment solution based on older data can help

reduce the time traders spend on other types of payments and allow them to focus on

customer service and sales. The solutions for electronic payments and online transaction

processing allow the acceptance of loans and debits, checks, currency acceptance and

contacts with fewer payment options.

2.1.7.2 Credit and Debit cards

Credit cards allows the holder to pay for services and goods in exchange by use of the

plastic card. Both credit cards and debit card are used by the customers for payment

goods and services. However, the fundamental difference between the two is where the

cards pulls the funds, the debit card takes it is from bank account but credit card is from

the line of credit. the banking. The card protects the owner in case he has un satisfactory

funds for the products. Sellers can be able to receive payments for goods delivered to

their clients. It presents the automatic capture of the purchase data in renewable credit

account (Pierce 2001). The recently introduced cards are the quickest and fastest utilised

16
payment methods in many countries (Pierce, 2001). After making payment, the funds are

immediately taken from buyers account. The importance part of it is that the buyer has

enough money at his disposal to buy and pay immediately, so there is no way to

download a credit card once the account statement arrives by email (Pierce, 2001).

The most commonly used credit cards include visa cards, Master card, American Express,

are the most accepted payments modes in main hotels, stores, markets, coffee shops,

restaurant, supermarkets and travel agencies around the world. Most of these cards can

also be used at some bank’s ATMs to collect small amounts of local currency.

ATMs have become very popular by spending money on other customer ,24 hours a day,

365 days a year. However, they have some restrictions on amount of withdraw and

denomination of the invoices paid. In addition, they cannot issue checks or money orders

such as ATM/Cashier at the bank, nor they can respond to unplanned customer inquiries.

they have no human face or cannot show empathy for a client who has problem.

2.1.7.3 Smart Cards

These are plastic cards with an inserted computer chip that can help in transmitting

information across a communication network between different user’s Smart card basics

(2004). The value of the information is stored on the card and is on integrated memory or

circuit and plays an important role in many aspects like health services, banking systems,

transportation of products). The characteristics of this card include: improve security and

convenience of transactions. The whole process is made by the use of virtual stores and

ensure data exchange Smart Card Basics (2004).

17
2.1.7.4 Electronic Purses/Wallet

Electronic wallets are categorised into the following:

Electronic purses with the Store card numbers; This is the virtual wallet in which you can

store credit and debit information. It also stores password membership cards and healthy

information that make it easier for customers to access products with the card (Rudl, no

date).

Electronic wallets that store card and cash numbers: this is the second category of digital

wallet that is used to store in your wallet and that it can be transferred from the credit

card, debit card or virtual check. It works as virtual savings account, where fees are

charged for purchases in progress, Particularly Micro-payments (Rudl, no date).

2.1.7.5 Point of sales (POS)/EFT

This is an online system that handles transactions that enables the buyer and seller to do

some business. it is also regarded as the Point of sale (POS). It involves a process where a

buyer swipes his bank through magnetic-stripe reader by using personal identification the

advantage of this is that it will facilitate clients to transfer money between bank accounts

and company accounts to facilitate purchase process. The debit card facilitates the

transfer process (Chorafas, 1988).

2.1.7.6 Mobile Banking and Money Transfer

A research conducted by zik (2005), highlighted that mobile payment is the payment

system that was settled using the mobile device. It is where individuals can access funds

using their mobile phones for example, one can perform numerous transactions with his

phone like to make payments to various clients or to get money from his phone to the

bank account. In the part of payments, the possibility of using phone payment system can

be viewed as on built-in (smart) card that can be useful in the storage of user’s

18
information. The fundamental importance of using other tools like Modems, point of sale

terminals and mobile card readers is quite considerable (Zika,2005, costello2003) the

study predicted the future development of mobile payment content will be possible in the

coming days. Mobile payments can be used in micropayments such as payment of

parking fees, transport tickets and charging cell phones

As of current, many banks in Rwanda provide Mobile banking services commonly

referred as Sms banking. It enables bank clients to do any inquiries regarding the banking

details, bank balances by the use of their cell phones mobile. The SMs banking helps in

cutting costs that could be incurred by customers to perform various transactions like

balance inquiry, transaction inquiry, requesting for cheque book, bank statement request

and utility bill settlement and clients can access their account balance and between

various mobile money accounts.

2.1.7.7 Internet Banking

This involves the use of virtual banking, considered also as telephone banking provides

different payment options by using internet. banks use telephone banking to perform

many transactions to its customers by informing them the status of their accounts or any

answering the request forwarded to the bank. Under e-banking the client conducts

business operations by negotiating with the use of phone connected to the automated

banking system which is done using automotive voice response Balachandler et al (2001)

Telephone banking has many advantages towards the end users, on the side of customers

it gives them comfort, extended access and time savings. Internet banking saves time that

could be wasted by visiting the bank or going to ATMs, retail banking has the main

objective of providing customers with services at their homes or their offices. Hence

being money saving for the customers and provides comfort and efficiency (Leow,1999).

19
2.1.7.8 Personal computer banking (Home banking)

PC banking is an online access of information from banks using personal computers. it

allows customers by using electronic devices at their homes or work place to make

payments to various beneficiaries. In complementing to computer technology, it can be

used with the telephone and interactive voice response. Chorafas (1988). Personal

computer banking facilitates the clients of the Bank to access their bank accounts through

restricted network more specially by the use of proprietary that is installed on their

personal computers (Abor,2004). It is used to do numerous tasks related to retail banking

that gives the clients various services 24 hours a day. This system is beneficial in terms of

reduced costs, increased speed and improving the flexibility of commercial transactions.

Financial institutions or Banks gives customers the software to allow them have access

information regarding their bank accounts which can be accessed when you check

through World Wide Web (www). The accessibility is not in big scale because its largely

the objective of corporate clients. This is more limited (Abor, 2004).

2.1.7.9 Online/ Internet payments

Internet payments allows customers to make transactions with the financial institution

without going directly to their premises. customers conduct transaction related to business

with banks through the internet. The bank partners can always get information regarding

earning accessibility to their bank accounts and perform transfers through a bank

provided website that meets certain strict security rules.

The Chicago Federal Reserve Board's (2001) Currency Control Office (OCC) Online

Banking Handbook describes online banking as giving traditional services by the use of

internet. The Internet is considered as a solution for quick services including payment

transactions and offers accurate transactions which gives high prospect of profitability.

20
The use of these services by the use of the internet will reach to many customers because

it distributes advertising materials through web (Neuman,1996)

2.1.8 Bank Results

Companies always start and end with customers, which is why customers are considered

the controller and king of the market. All business activities such as earnings, status.

Customers who trust the image depend on the customers. This is why it is very important

that customers in all organizations meet all customer expectations and declare that they

are satisfied.

2.1.8.1 Measurement of Performance

The measurement of performance is the systematic and periodic collection of data,

analysing the company reports and applying better monitoring and evaluation tools to

obtain the results from the products and services manufactured. Bamberger (2003).

According to the research by Kaplan and Norton (2002), the results of operations are

evaluated using the comprehensive balanced score card (BSC). Balanced score card deals

with all aspects other than financial resources that can be used to measure how the

company performs in different aspects of customers and internal aspects of appraisal.

According to Dixon (2000), Performance measurement is intended to facilitate employee

development, because as the result of better outcomes employees are rewarded for

providing feedback and guidance and helping employees set goals and identify needs in

terms of training both for individual employees and for organisation at large. The

effective Performance covers the identification of key performance metrics and establish

the objective of each performance indicators, the consideration of key attributes of useful

performance, the review of periodic results and the presentation of the results with the

stakeholders including employees.

21
When you start your own business or participate in other investments, you need to

evaluate the results of your shares based on facts and figures. This business has several

parts to see and here are some tips regarding company performance that should be

considered to make necessary changes to achieve the key objectives of evaluating

company’s balance sheet-based assets and liabilities, reviewing cash inflow and outflows

reports to review the operating, Financial activities and investment. The impact of these

activities can be understood from income and expenses of profit and loss account. Make

internal cost and sales comparisons to see if inventory is increasing while sales remain

stagnant indicating misuse of inventory (Mercy 2001). Compare lender and the borrower

values between current and past balances to evaluate their credit history, verify how

customers are happy of services, analyse customer complaints and review end user shape

while maintaining consistency and quality in terms of efficiency and reliability (2000).

Likert (2008), states that the performance measurement initiative fails due to poor design

and implementation difficulties. Organisation performance should be measured along

with organizational level that requires additional dimensions and information for

planning.

Wahab (2000), considers Performance to focus on measures that what the company does

identify and communicate success factors, support organisation learning, and provide

these performance measures and hence a basis for evaluation and reward (2000).

Performance attributes are those that help the organisation to move its actions to achieve

its fundamental objectives direct. Performance measures are those that support business

objectives because business performance business performance is critical for the future

wellbeing and prosperity of the company.

Ssejaka (1996), Profitability has been widely used as indicator of financial performance.

The company is considered to be profitable when the revenues exceeds the expenses

22
which can also be expressed in rations, comparative statement, common size statements

or trend analysis which indicates the performance for many years

It also includes Gross Profit Margin, Net profit Margin and return on capital. on the other

hand, profit as a measure of performance has many limitations. According to Burns

(1999), the benefit is ambiguous, because different people may see it differently,

especially accountants and economists. It also means a large number of estimates, such as

stock depreciation and valuation, which ultimately gives different attributes according to

the method used.

Drucker (1990), noted that some profit and cost accounting results measures does not

largely support changes in an organisation shape, he attributed much attention on non-

financial measures such as Management and employee skills involving rotation should be

considered very critical aligned to business strategy.

2.1.8.2 Business Performance dimensions

Business competitiveness according to Herciu and Ogrean (2008) (2008) and Lopez et al

(2005) defined competitiveness in which the company offers better services in terms of

competitive advantage that increase the market share and has upper hand in the overall

industry performance in some areas like market share, industry position and rate at which

sales tend to increase. The business performance can be judged depending on financial

and non- financial results more especially on the level of profits, liquidity position,

balanced capital structure, share of the Market, services provided that are reliable,

responsive to time constraints, communication, flexibility of supply, appearance, purity,

availability of resources, innovation and efficiency (Fitzgerald et al., 2006)

2.1.9 Analysing Banks Using CAMELS Methodology

The camel methodology is used to analyse bank risk; This approach was developed in the

United States. This methodology is used to evaluate banks taking into account factors that

23
affect a bank's credit quality (Maheshwari 2009). This approach is becoming an industry

standard. The RBI Setup staff was introduced in India in the early 1990s in 1995. The

international bank rating system established a system to be used by both internal and

external banks based on the Camels methodology, in which the supervisory authority

used performance evaluation based on six main aspects. These aspects are indicated by

“CAMELS’’ Where C represent Capital adequacy and A is Asset Quality, M is

Management quality, P is the profit, L represents liqidity and S sensitivity to market risk

(Maheshwari, 2009).

2.1.9.1 Capital adequacy

This is the amount of capital that the bank can put aside as percentage of risk factors that

helps in reducing default risk. The capital adequacy is the capacity of the bank or

financial institution to carter unplanned or planned items that it did not go as it was

planned. It is also analysed by the ratio of capital to risk weighted assets (CRAR). A

solid capital base enhances depositor’s confidence.

2.1.9.2 Asset Quality

The higher the asset quality, the higher the efficiency of assets to total loans this implies

that the quality of assets depends on the efficiency of assets in total loans. The asset ratio

is the ratio of the outstanding loans to the total loans (GNPA). Gross unprofitable loans

compared to the gross advance rate indicate the quality or good bank decisions made by

bankers.

The highest GNPA indicates bad credit decisions. Therefore, management must take

certain steps that may include adapting effective policies before granting a loan, applying

policies such as granting loans, monitoring the portfolio after granting a loan and

maintaining the adequacy of credit losses or allowed leases. (Maheshwari, 2009). The

operation of five other CAMELS will depend on the quality of the management. The

24
relationship between interest-free costs and the total assets can be one of the means to

assess Management performance. This variable covers the scope of expenses, such as

expenses related to payment, employee compensation and training and investments. This

reflects management principles and decisions. Another important indicator that is useful

for assessing the quality of management is the unit cost of the money borrowed, which is

the operating cost with the total amount of money paid (Maheshwari 2009).

2.1.9.3 Quality of management

Assessing the quality of banking management is a matter of professional judgment

regarding banks' compliance with policies and the adequacy of taking risk procedures,

and development of strategic plans according to the report of the European journal of

accounting Volume 3, No 4

2.1.9.4 Profits

Organizational profit, which includes the institution's quality and profit trend, largely

depends the efficiency and effective management of resources which includes both assets

and liabilities. The organisation must make enough profits to support the growth of its

assets and accumulate adequate reserves to maximise equity which normally measured in

terms of the proportion of assets

2.1.9.5 liquidity

Liquidity deals with the company capacity to meets its short term obligations to both

depositors and creditors in order to increase public confidence and trust among various

bank-held cash holders by balancing with Central bank. The balances from financial

institutions and those with central bank in comparison to the total assets ratio and asset

ratio are the bank’s liquidity ratio. Therefore, banks with a large amount of liquid assets

25
are considered safe. Because these assets would allow banks to pay unexpectedly

(Maheshwari, 2009).

2.1.9.6. Market risk sensitivity.

Risk management is the main focus of FI's interest. Management of risk with in the

banking sector is very critical this enables to cater for the increasing interest rates,

exchange rates and commodity prices that if not managed well would affect the

profitability of the bank in long run. The major risks that might affect the bank

performance include risk of the market, currency risk, expiration risk and retention risk.

(Maheshwari,2009)

2.1.9.7 Classifications

The qualification symbol means: The symbol A is healthy in all aspects. Bank B is

generally healthy, but with some challenges like financial or compliance with regulations

that render supervision problems. Some excessive, financial, operational and

administrative weakness that may undermine the attainability of desired outcomes future

and there is high possibility of failure in near future if no caution is exercised

2.1.10 Challenges Banks Face Through Electronic Payments

Establishing an effective monetary policy transfer system involves many factors. These

challenges point to deficiencies in infrastructure design, like uneven supply of power and

channels of communication, this is most common in developing countries where

infrastructure is in adequate to enable payment systems to occur. The Government or

organisation willing ness to provide stable and efficient power supply and

telecommunications systems (Oleka,2009).

Lack of competent administrators and instruments for customer systems and end users

would make it difficult to use electronic payment systems, here more emphasis should be

26
placed on supply infrastructure and skilled labour to avoid this problem, another

hindrance goes with accumulation of resources in the economy which requires

government intervention in discouraging the dominance of the use of money to support

electronic payment systems. In addition, there are high rates for electronic payment

terminals (ATM), so bank regulations must specify standard fees for electronic payment

services (Littler, 2006).

The lack of adequate anti-fraud mechanisms in terms of increasing security measures

needs to be addressed. These measures may include backup cameras on all ATMS

machines. The training centre in the United Kingdom (www.eajourals.org), confirms the

identification of operator accounts and using a good computer assistant to dictate and

prevent hacking fraud. The lack of government supports to improve electronic banking is

very important. National central banks should participate in the creation of public

awareness campaigns and undertake infrastructure challenges for relevant government

agencies. Other obstacles include:

2.1.10.1 Power and communication failure

Continuous and constant power failures due to infrastructure deficiencies has hindered the

growth of payment systems. Absence enough ATMs, as well as failures in the Nitel line,

which generally cause jumps and surges due to permanent electronic power (Akinuli,

1999).

2.1.10.2 Without computer backup

Lack of enough internal controls like absence of computer backup system may not

provide immediate solution when the banking system is damaged, customer information

may be damaged or lost in the process which may lack of a computer backup system,

which may ultimately lead to the appropriation of customers’ accounts and therefore the

bank should develop manual backups to maintain the data (Akinuli, 1999)

27
2.1.10.3 Absence of enough capital for investment

Investment in information technology require a lot of finance that could facilitate the

acquisition of new information communication tools and restructuring the existing ones.

These resources are generally scarce. Although banks have adopted modern banking

applications including an integrated banking system in which some innovations continue

to be introduced, especially in the area of developing products, and there has been great

improvement in speed of transfer of funds in and out the National economy (James 2009)

2.1.10.4 Reduce employment opportunities

Electronic banking in this country reduces the job opportunity rate in a country where any

activity or job that a person performs is done or replaced by electronic payments, which

would eventually lead to a low employment rate in that country (Olekma, 2009).

2.1.10.5 High machine loads

The rising fees and commissions imposed by banks are increasing for customers, which

discourages customers from using electronic banking tools to exchange transactions.

Examples of such fees are charged for withdrawals using ATMs and electronic bank

transfers from one bank to another for interbank transfer fees (James, 2009).

2.1.10.6 Low social acceptance

In particular, the general public or customers do not trust electronic payments for fear of

fraudulent activities, even today banks are using machines to steal money from customers

from their accounts. Some campaigns for clients who sometimes retire at ATMs. If they

took the card while debiting the bill, withdrew money to solve the need, the customer

may be demoralised because it will take longer or will end up in solution. (James 2009).

28
2.1.10.7 Lack of bank security

Most electronic banking machines are currently unsafe because they are in most cases

targeted by scammers who sometimes penetrate the banking system and do some illegal

activities without being detected easily by the bank after committing some crimes. Due to

this uncertainty challenge, Financial institutions cannot prevent, deter or detect any

fraudulent activities. Cyber criminals may take lead of the system and manipulate data

for their personal gains or information by restricting codes (Hidalgo, 1996).

2.2 Empirical review

An empirical review deals with the review of knowledge and actual experience not theory

or belief. it involves review of relevant theories by the researcher reviews, information, or

other research-related documentation or theories currently available on the subject under

study, which may also be considered the historical background of the subject.

According to England et Al (1998), he was one who studies to estimate the number of

United states banks using e-payment and analysed the structure, performance

characteristics of the banks. This was not proof of significant differences in the bank's

performance, which provides electronic payments and those that do not provide these

services, when you consider the profits that they generate or efficiency of credit policies

but in terms of service delivery and a number of transactions performed by banks with

electronic systems were numerous compared to their counterparts. This is the same

results presented by England et al (1998), who advanced that banks that use electronic

payments were large in size compared to other banks, profitability for others without

electronic payments or those who depend on a traditional payment system. The

transactional electronic banks however, banks differed mainly in their size however. This

was in agreement with the results forwarded by England et al (1998), who revealed that

banks of all classes that provided electronic services to customers were expanding their

29
capital base. writers found that online banking had little impact on the profitability of

Sullivan Bank (2000), which revealed that is automated banks of 10th federal district

incurred slightly higher operating costs, but made up for it with a commission. a little

higher income. On average, no systematic system was found in this study.

The study provides evidence that banks have received help or damage by offering

electronic payment systems. Similar to the findings of Fursta et al ( 2000a, 2000b, 2002a

and 2002b). This study also showed that the mortar or mortar banks performed much

worse than the new mortar banks.

The study by Hernando and Nieto (2005), evaluated the results of many financial

institutions in Spain between (1994-2002). The results of their research revealed the

greater profitability of multichannel banks by increasing commission revenues, increasing

brokerage rates and ultimately reducing levels in person, and finally they concluded that

Internet channels should complement to the existing banking channels. Unlike previous

researches, multi-channel banks in Spain had typical banking transactions, like loans,

deposits and collection of securities trading. The creation of internet channels had a

reasonable effect on bank overall profitability after one year and a half of its

implementations. This explains the lower overall staff costs and subsequent IT costs.

By using information obtained from some banks from Italy, Hasan et al (2002), indicated

that financial institutions that use online systems performed better than the one that does

not use on line. In addition, the volatile risks associated with banks that use the Internet

remain lower compared to banks that do not use the Internet. The assets and liabilities

variables revealed that, on average, banks that use the Internet grew, with greater

commercial and investment activity, and could have depended slightly on retail deposits,

including cash deposits. Demand and savings compared to banks without using the

Internet.

30
DeYoung (2005) systematically analysed the financial results of banks using the US

Internet. In the US, the study showed that profits at online institutions are lower than at

bank branches, in part because of high labor costs, low commission income and problems

with fund depositing. However, according to the standard online banking methodology,

the study showed that only banks using the Internet increased significantly compared to

banks that do not have the Internet or banks using traditional methods.

According to the research conducted by Oginni Mohammed, el-maude and Abam (2013),

on the study of electronic banks in Nigeria. His research paper reviewed the contribution

of electronic banking on the performance of banks. Performance data contained in

audited annual financial statements of eight banks that uses electronic banking revealed

that banking that implemented electronic payments were Performing better in terms of

return on assets , return on equity and Net interest margin , the macro –economic

variables also indicated that those banks were stable when compared to banks that still

use traditional payment system but according to information obtained from the analysis of

the audited financial statements those banks were not performing well in the first year of

implementation due to high costs associated with the installation and maintenance of

electronic payment systems

2.3 Critical review and gap in the literature

Commercial banks are affected by the wind of change due to globalisation of economies

and competition from banking and non- banking institutions to increase the value of

services it provides to its customers. The issue which drives performance is of the utmost

importance and is a priority, and therefore strives to achieve them. Critical research

efforts have been dedicated to solving this problem, ranging from strategic or high to

operational level. Vanda Verde, (1992), conducted a research to analyse the tactics and

strategies of comparative evaluation of the main retail banks. This research was based on

31
the views of retail bank directors for all commercial banks based in various banking

departments, such as operations, marketing, organizational excellence and finance. This

discovery made it possible for the establishment of a service management strategy, thus

improving bank’s performance and operational capacity (Forth and Jackson 1995). In

turn, the quality of service results and quality pathways focus on the vision of a profit

maximization chain (Heskettet 1994).

However, in Rwanda, despite attempts by banks to try to enforce payment services,

Rwanda still faces challenges that must be addressed to promote the efficient and efficient

operation of banks, namely: developing an efficient money transfer. In Rwanda, the

system was hampered by many factors. Rwanda faces infrastructure deficiencies, such as

lack of energy and communication links in some areas, administrators and inadequate

tools needed by end users and customer systems, heavy loads or terminal costs electronic

payment (ATM) to establish banking regulations. Therefore, it is believed that these

factors undermined the effective operational of banking services in the country and,

therefore, affected the efficiency of the banks. It should also be taken into account that

some academic research has been conducted in relation to electronic payment and

therefore the researcher would like to add value to the research world. the researcher

would like to investigate the impact of electronic payments on the results of commercial

banks in Rwanda to Despite the above factors. recommendations to improve electronic

banking in the country.

32
2.4 Conceptual frame work

The conceptual framework in this study is based on the relationship of independents

variable and dependant variables.

Independent variables Dependant variable

Financial Performance
Electronic payment
system  Customer deposits
 Mobile banking
 Asset turnover
 Point of sales
 Internet banking  liquidity
 Electronic Cards ATM
 efficiency of the bank

Intervening variables
 Reliable
 Network
 Power availability
 Inadequate skills

Figure 2.4: Conceptual framework

Source: Researcher 2019

The study sets out the relationship between electronic payment and Financial

performance of commercial banks in Rwanda. E-payment is independent variable while

Financial performance is dependent variable.

33
 CHAPTER THREE: RESEARCH METHODOLOGY

3.0 Introduction

This part indicates how the research was conducted for attainment of the research

objectives. It shows how the entire research methodology is designed, the testing

procedures adopted in the research process, the target population of the survey, the

sample design and the sample size obtained from the population, data collection

instruments as well as data processing and analysis, the relevancy of the study and finally

limitations found during the investigation process.

3.1 Research Design

It entails the scheme or a plan that shows the procedures that will be established

procedures that will be established or used to obtain answers to research questions.

Specifies the procedure used during data collection and analysis for research purposes.

The descriptive type of the study was adopted by the researcher for this academic

research. It proposed to clarify the effect of the electronic payment system on the overall

operational results of commercial banks in Rwanda with Bank of Kigali as the case of the

study.

3.2 Target population

It is defined as the total number of the people and objects from which samples can be

collected for measurement; This was presented by (Lawrence, 1990). The population is

defined as the objective, as well as all elements in a set in which the researcher focused

and based his analysis so as to come to sample that enabled him to conclude his research

findings. Before conducting this study, the researcher analysed the contributions of

electronic payment on the financial results of bank of Kigali. In order to obtain relevant

and reliable information on the success of this research, the population of the study was

34
120 people which includes both the employees and customers of BK, more especially

those who work in the electronic banking department because they know how to use

electronic payments.

3.3 Sample design

Sample size 3.3.1

Although the population studied for Kigali was 120, it was appropriate to provide relevant

information, it seems to be more complex. The researcher calculated the sample size

using the formula (Israel, 2009). This formula helps determine the sample for a given

study population. The formula is described as follows:

N
n= Where n = sample size, N is the target population, e= level of Precision
1  N ( e) 2

or marginal error

Then N= 120 persons, e = 5%=0.05

Then, we substitute in the above formula the number of the population (120 persons) in

order to find out the sample size:

Hence the sample size will be

Based on the above formula, the researcher used 95% as the confidence or precision level

of which Alain Bouchard says is more reliable. The sample size has been fully calculated

then, the interviews were conducted to those respondents selected and questionnaires

were filled by them.

3.3 Sampling techniques

The sampling methods used in this research include both purposive sampling and simple

random sampling. Purposive sampling is where by the researcher directs his research to

the respondents who he thinks will provide the information that is reliable the researcher

uses his judgment to choosing the right respondents or choosing those that fits the essence

35
of the research. For contacting the staff of bank of Kigali the researcher applied purposive

sampling and Simple random sampling was used for the case of bank customers. To

justify this the researcher applied purposive sampling in order to obtain adequate

knowledge and information related to the research. This technique do not embody the

elements of randomness, the researcher decided to sample from a population which seems

to have a global knowledge about the study. Simple random sampling is the technique of

choosing from the population in way that gives all members equal chances of being

considered (Kothari, 2004). The researcher used this method of sampling when choosing

bank of Kigali customers.

3.4 Data Collection Methods

A source is one of the materials that the researcher has to use for collecting information

during the investigation. The researcher employed both first-hand information from

respondents and information from Secondary sources. The primary sources enabled the

researcher to measure the relevance of qualitative information towards the purpose of the

study. Secondary data enables to draw reliable quantitative data towards discovering the

link between electronic payment and Financial Performance of commercial banks in

Rwanda. The primary data came from the people directly by answering questions from

questionnaires or by interview guide and therefore the most kind of information to collect.

Crawshaw and Chambers (2002) stated that, the first-hand information is very important

during research work as enables the researcher to draw the conclusions on research

findings. According to Williams et al., (1999), Second hand information already exists in

boxes or files in organization’s basements or hidden in the core of computers. Under this

study, the staffs and customers of Bank of Kigali were chosen to provide primary data.

The secondary data were obtained from journals, books and internet sources of Rwanda

36
3.4.1 Instruments used in Data collection

The researcher used many sources which include the following: library source,

questionnaire and interview guide. The questionnaires were developed in the sense of

finding out the relationship of electronic payments and financial performance. The

questionnaires were formulated according in relation to the objectives of the study and the

interviews were conducted consistently.

3.4.2 Questionnaire

This is the set of questions addressed to various respondents some questions are

administered or structured while are open and closed questions. It also defined as an

instrument for data collection consisting of a set of questions which is sent out by mail in

the hope that the recipient fills it and return it. In case of this research self-administered

questionnaires reached to the employees and clients of bank of Kigali in order to permit

free and fair responses from the respondents by taking into considerations their positions,

knowledge and working departments.

3.4.3 Interview guide

It is another method of data collection which is the conversation between the researcher

and interviewee. This technique tries to get the information from the respondents who are

expected to have more required data and who may be having little time to answer the

questionnaire. The interview was conducted to various customers of bank of Kigali and

some employees of bank of Kigali especially IT department to complement to the

information provided from questionnaires.

3.5 Data analysis Procedure

As said by Crawshaw and Chambers (2002) data processing concerns with categorisation

of responses into useful classes known as codes. It includes the following, editing, coding

37
and tabulations editing, coding, and tabulation. After processing data, the researcher

started the process of analysing them. The responses obtained from the questionnaires

were processed and edited using SPSS and Ms. Excel for an easy interpretation.

Editing was done to ensure completeness, accuracy, uniformity and legitimacy in the

questionnaire. From data collection, the researcher conducts inspection in order to

discover items that should be misunderstood by the respondents to detect gaps and other

weakness in data collection methods. In this research, coding was used, to summarise and

categorise different responses for easy manipulation. After detecting errors, code was

assigned to each answer. This stage helps in construction of statistical tables indicating

the frequency distribution of answers to the respondents. The researcher employed both

quantitative and qualitative analysis. For the quantitative analysis, data was collected and

presented in different tables and the analysis focused on frequencies and percentages.

3.6 Reliability and Validity of the research.

According to the analysis made by mugenda (2003), reliability is the consistence of

research instruments to measure the degree of which the tools can yield better results or

data after repeated trials.

Validity is regarded as the accuracy and meaningless of inferences which are based on

the research results (Mugenda & Mugenda, 1999). In other words, Validity is the degree

to which results obtained from the analysis of data actually represents the phenomenon

under study to ensure that the questionnaires were reliable and valid, the researcher used

simple and clear language and terms that could be understood by the respondents. Closed

ended questions were used as they have been proven in most researches to be most

reliable for analysis. To ensure validity, the researcher was sure that questions used relate

to or covered all the variables of the study.

38
3.7 Ethical consideration

This regards seeking permission by the researcher from the Bank of Kigali and use

information for Research purposes. The researcher used the accepted research methods in

the entire research process in planning, collecting, organising and interpretation of the

data. And ensured that data was interpreted according to general methodological standard

and made sure that element that are irrelevant to data interpretation are excluded from the

report. The researcher kept all information given to him very confidential and used it only

for academic purposes.

The researcher ensured that the study fulfil moral considerations of research by ensuring

respect for confidentiality of information from the respondent. To mint research ethics,

the following activities were implemented by the researcher:

1. Names of respondents will not appear in this study.

2. Respondent signature for consent.

3. Permission will be solicited from the concerned officials of Bank of Kigali.

4. Authors cited will appear in the references to avoid plagiary

5. The findings will be presented in generalized manner.

39
 CHAPTER FOUR: RESEARCH FINDINGS AND DISCUSSIONS

4.1 Introduction

This part contains the research findings of the study based on the information collected

from the Bank of Kigali, Rwanda. The findings are presented in tables and analysis was

made using simple English for easy understanding.

4.2 Responsive rate of respondents

The researcher collected questionnaires that had earlier distributed to employees and bank

of Kigali customers in which 81 out of 92 questionnaires were responded accordingly and

therefore the response rate was at 88% which is considered as appropriate according to

Babbie (2004), in the descriptive kind of study, 50% and above is considered as standard

response rate.

4.3 Demographic Information of the respondents

4.3.1. Respondents by gender

Table 4.1: Respondents according to gender

Frequency Percent

Male 36 44.4

Female 45 55.6

Total 81 100.0

(Source: Primary data,2019)

The study reveals that 44.4% of the respondents who answered the questionnaires were

males and 55.6% were female this means that the big percentage of the sampled

population was female. The statistics in terms of gender representation indicates that the

bank employees are more female than male when you use the sample to reflect the total

40
population in Bank of Kigali. It can me concluded that banking services attracts more

female than male gender due to its operational services

Table 4.2: Age Bracket of the Respondents

Frequency percentage

21-30 16 19.8

31-40 37 45.7

41-50 19 23.5

51 and above 9 11.1

Total 81 100.0

(source: Primary data, 2019)

According findings of the study, the majority of respondents 45.7% were aged between

31-40 years as shown in the table above 23.5% are aged between 41-50, 19.8% are aged

between 21-30 and 11.1% are aged 50 and above. The study implies that the majority

employees of the banks are youth below 40 years of age. This group involves individuals

who are in their early adulthood and are strong, enthusiastic, fast in what they do,

innovative, swift and therefore they are highly absorbed in many organizations to drive

the operations with efficiency.

Table 4.2: Educational qualification

Frequency Percent

Undergraduate 53 65.4

Post graduate 24 29.6

Others specify 4 4.9

Total 81 100.0

(Source: Primary Data, 2019)

41
The statistics indicated in the table above shows that 65.4% of respondents were

bachelor’s degree holders, 29.6% have master’s degree and 4.9% acquired professional

qualifications which meets the job operations assigned in the bank for instance some cited

that they have a higher diploma in computer science, IT, ACCA and CPA. This means

interviewees are educated, which means they can reliably read, comprehended and

interpret questionnaires. The information collected was regarded as reliable and therefore

to provide results.

Table 4.3: Experience working in the bank

Frequency Percent

1-2 years 7 9.8

3-4 years 27 33.3

5 years and above 46 56.8

Total 81 100.0

(Source: Primary Data, 2019)

The information contained in the table above shows that 56.8% of respondents worked at

Bank Kigali for 5 years and more, 33.3% between 4-5 years and 9.8% for a period of 1-2

years. This means that almost all respondents had experience working with bank of Kigali

and therefore, the data they provided was deemed reliable. This shows that they are more

experienced and registered low staff turnover. In most cases, employees leave their jobs

in search for better opportunities or the management of the organization is unattainable to

work. In this case, it seems that the big number of employees of BK are happy with their

working environment.

42
4.4 Mobile Banking and the Customer deposits of BK

The overall objective of this academic research was to analyse the role of electronic

payment system on financial results in banking sector particularly on bank of Kigali, and

one of the specific objectives was to evaluate the impact of Mobile banking on the

profitability of the BK. The study revealed the following in the table shown below:

Table 4.4: Mobile payments on customer deposits

Frequency Percent

Strongly agree 65 80.2

Agree 15 18.5

Undecided 1 1.2

Total 81 100.0

(Source: Primary Data, 2019)

According to the statistics in the above table indicates that 80.2% of the respondents

strongly accepted that Mobile banking is one of the mostly used payment system in the

bank and affect the customer deposits, 18.5% agreed that mobile banking can contribute

to the customer deposits of the BK while 1.2% were undecided. It is usually made where

the bank and mobile application are connected such that deposits or transfers can be made

from the mobile to the banks and vise vasa, this allows clients to enter the accounting

system using a flexible card or by selecting a special code number in a computer terminal

connected to computerized businesses records the finances throughout the day.

43
Table 4.5: Point of sales on Asset turnover

Frequency Percent

Strongly agree 67 82.7

Agree 14 17.3

Total 81 100.0

(Source: Primary Data, 2019)

According to the table above, point of sales contributes to asset turnover by 82.7% and

therefore point of sale has a positive effect on asset turnover and 17.3% agreed normally

that indeed the bank uses this platform to make electronic transfer payments. This seems

to be a popular platform used in the bank to transfer funds from accounts in the bank to

mobile phones. Current technology has made it simpler for bank clients to access banking

services when from one bank to the other or in different branches. Customers can access

their accounts or perform any transaction at anytime and anywhere, such as checking

account balance, checking account balances, paying invoices, transfers from bank

accounts, updates and history, as well as inter-account transfer, etc.

Table 4.6: Internet banking and Liquidity position.

Frequency Percent

Strongly agree 44 54.3

Agree 36 44.4

Undecided 1 1.2

Total 81 100.0

(Source: Primary Data, 2019)

The review of respondents indicated that 55.3%, strongly accepted that electronic cards

have a role to play on the liquidity position and 44.4% agreed while 1.2% undecided.

44
According to information contained in the table above most of the respondents agree that

electronic cards can help in containing the liquidity position of the bank. The internet

payment system is the banking service that applies internet in daily operations and

transactions that connects them to customers. With the use of internet, the client can

check the account balances at any time, exchange money from one bank account to the

other, confirms payments to suppliers, verify checks and send a loan and credit

application. It should be emphasized that online banking is one aspect of the electronic

banking system

Table 4.7: Electronic payment systems ( cards) and bank efficiency

Frequency Percent

Strongly agree 40 49.4

Agree 27 33.3

Undecided 4 4.9

Disagree 10 12.3

Total 81 100.0

(Source: Primary Data, 2019)

According to the study 49.4% of the respondents strongly agreed that electronic cards is

being used by bank of Kigali and it contributes to bank efficiency. 33.3% agreed that

they use electronic card while 12.3% dis agree and 4,9% un decided. Based on the

information from the respondents the total 82.7 agree that electronic cards have an impact

on the bank efficiency of bank of Kigali. In terms of using these cards some customers

(17.2%) are not informed about the usage of electronic cards and therefore there is a need

for the bank to continue to do consumer education on their products.

45
Most of customers believe that electronic cards have increased safety and risk compared

to previous periods when customers had to carry huge about of cash which had risks in

terms of theft but today customers can use their cards to do many transactions like

purchasing of various products

4.4.1 Contributions of internet banking on Financial performance of BK

The researcher wanted to assess the extent to which electronic payments models are used

by its clients in the bank and how does it add to the general performance of BK and the

results were rated in a Likert scale from 1 to 5; one being used by very many clients and 5

being used by very few clients.

Table 4.8: Descriptive Statistics showing the magnitude of use by clients

Mean Std. Deviation

Electronic card payment system (ATM cards, Visa

1.06 .242
cards, etc)

Mobile phone payment system 1.10 .300

Internet payment system 3.14 1.421

Electronic card payment systems 3.42 1.350

Valid N (listwise)

(Source: Primary Data, 2019)

Based on the information provided in the table above indicates that electronic card

payment system (ATM cards, visa cards etc) had a mean of 1.06 and the standard

deviation of 2.42 which is an indication that the big number of respondents agreed that

electronic cards are mostly used by the clients and that it has an impact on the overall

bank performance. The standard deviations is very small which is the sign that the

majority of respondents chose their answers closer to the mean. it also implies that many

46
BK clients use electronic cards to withdraw cash from their accounts, check bank balance,

make deposits or even pay for goods and services at any point of sale.

On the issue of Mobile payment system, the descriptive statistics rated the response to

have a mean of 1.10 and standard deviation 0.300. It signifies that most of the

respondents chose the value “1” which was coded to represent those who answered that

mobile phone payment system are used by “very many clients”. The standard deviation is

also small, which implies that majority of the rest chose rating 2 which is not far from the

mean.

Internet payment system was rated with average of 3.14 and heterogeneous standard

deviation of 1.421 which implies that majority of the respondents chose the value

3(undecided). The standard deviation is high meaning that majority of the respondents

selected their choices far from the mean. This implies that internet banking is not really

popular and majority of the respondents are not certain that they are used by BK clients or

not.

The adoption of electronic card payment systems by clients was also rated to have the

mean of 3.42 and a heterogeneous standard deviation of 1.350. This implies that majority

of BK clients do not often use electronic payment system and that is the reason why

majority of the respondents could not confirm with certainty the level at which BK clients

are able to use electronic card. As mentioned earlier, this is not a popular form of

electronic payment system since majority of the card being used currently are written and

signed by hand.

4.5 Contributions of electronic payment in promoting bank efficiency

The researcher wanted to analyse the extent to which electronic payments promotes the

banks efficiency. The results are indicated in the table below.

47
Table 4.9: Descriptive Statistics showing the effectiveness of electronic banking

Mean Std. Deviation

Depositing 1.21 .786

Checking accounts 1.25 .969

Withdrawals 1.06 .242

Making payments 1.68 .544

Valid N (list wise)

(source: Primary data, 2019)

Most of the respondents stated that E-payment system very effective in making deposits

as shown by the descriptive average of 1.21 and standard deviation of .786 Presentation

shows big number of the respondents agreed that electronic payments is used in

depositing of cash and check in the bank and this has increased bank savings and liquidity

being managed. This implies than the clients use electronic payment even in in deposit

cash through, mobile banking, AMT machine, internet payment, pay direct and visa or

debit card transfer. The respondents further stated that e-payment is very effective in

withdrawing money as evidenced by the mean of 1.25 and a heterogeneous standard

deviation of .969. This reduces the time going to the bank to queue in long lines. Such

transacts can be made at the comfort of your home and it only takes few minutes.

Checking bank balances as well as transferring or making payment are also rated to be

very effective while using electronic payment system as indicated above.

E banking also help bank clients to authorize payments directly from the bank for

example purchase form supermarket, payment of electricity and water bills. This makes it

convenient for the bank, account owners and the supplier of goods. Checking balance

48
another transaction performed by electronic banking where by clients can use ATM,

mobile banking and internet banking to check for their balance direct from the bank and

this can allow clients to make a decision on how much to deposit or withdraw. Therefore,

it can be concluded that electronic banking has impact on the bank performance through

reducing costs and leveraging on deposits which given to other financial institution and

hence generates interests which will eventually lead to profits.

4.6 Significant of electronic payment systems on financial performance of the bank

The researcher ought to assess the respondent’s perception as to whether the e-payment

has significantly affected the financial performance of the bank. The results are indicated

in the table below;

Table 4.10: Significance contributions of E–payment on Financial Performance

Mean Std. Deviation

Electronic card payment system (ATM cards, Visa

1.15 .450
cards, etc)

Mobile phone payment system 1.10 .339

Internet payment system 1.74 .848

Electronic card payment systems 1.78 .806

Valid N (list wise)

(Source: Primary Data, 2019)

Most respondents said that the electronic card payment system (ATM cards, Visa cards,

etc.) significantly contributed to BK's performance, as shown indicated by average of

1.15 and standard deviation 0.450

49
The study showed that mobile phone payment system also significantly contributed to the

bank's financial results, as evidenced by an average rating of 1.10 and a heterogeneous

standard deviation of 0.339.

The online payment system also significantly contributed to the bank's financial results,

as indicated by an average of 1.74 and standard deviation of 0.848

Finally, electronic check payment systems have significantly contributed to the bank's

financial results, as evidenced by an average of 1.78 and a standard deviation of 0.806.

According to the BNR report, from 2015 to 2018, the number of people using the mobile

payment system is constantly growing.

Table 4.11: Correlations between Electronic payment and its performance

Depositing Checking Withdrawals Making

accounts payments
Electronic card Pearson
.486** .464** .464** .443**
payment system Correlation
(ATM cards, Visa sig ( 2-tailed) .000 .000 .000 .000
cards, etc) N 81 81 81 81
Pearson
.379** .290** .425** .392**
Mobile phone correlation
payment system Sig. (2-tailed) .000 .009 .000 .000
N 81 81 81 81
Pearson
.303** .260* .260* .707**
Internet payment Correlation
system Sig. (2-tailed) .006 .019 .019 .000
N 81 81 81 81
Pearson
.053 .051 .051 .546**
Electronic cheque Correlation
payment systems Sig. (2-tailed) .638 .653 .653 .000
N 81 81 81 81
**. Correlation is significant at the 0.01 level (2-tailed).

(Source: Primary Data, 2019)

50
The purpose of this research was comprehend correlation between electronic payment and

financial performance Payment by assessing its effectiveness in depositing money,

checking account balances, making withdrawals and making payments. The results

indicate that there is statistical significance difference between Electronic card payment

system (ATM cards, Visa cards, etc)

There was statistical significance relationship between mobile payment system and its

effectiveness in depositing money

The study indicates that there is statistical significance relationship between Internet

payment system and its effectiveness in depositing money as indicated by Pearson

correlation of .303 checking deposits

The study revealed is no statistical significance relationship between Electronic cheque

payment systems and its effectiveness in depositing money (Pearson correlation of .053

and a P-value of .638), checking account balances (Pearson correlation of .051 and a P-

value of .653) and making withdrawals (Pearson correlation of .051 and a P-value of

.653). However, there is correlation between making payments as indicated by Pearson

correlation of .546 and P-value of 0.000

51
 CHAPTER FIVE: SUMMARY, CONCLUSION AND

RECOMMENDATONS

5.1 Introduction

This part presents the summary of major findings of the research, conclusions and

discussions various research findings, the general conclusion of the study,

recommendations of the study and finally suggestions for areas of further research.

5.2 Summary of key findings

5.2.1 Mobile banking and customer deposits of BK

The research revealed that the electronic payment system exists in many forms. Statistics

show that 80.2% of the respondents strongly accepted that mobile money banking is one

of the most common used payment system and believed it affected the customer deposits

bank of Kigali in one way or the other. Most of the respondents agreed that mobile

banking enables quick service delivery, increases deposits and facilitates many

transactions which eventually reduces costs of monitoring and hence increases bank

profits. today mobile banking allows customers to do many transactions without going

directly to the bank there by saving time and resources that the bank and customer would

to serve to be served. this practice is normally done when the bank and the mobile

application is connected such that deposits or transfers can be made from the mobile to

the banks and vice versa

5.2.2 Point of sale on asset turnover

The study also highlighted that 82.7 % of the respondents strongly accepted that point of

sales is the strongly preferred method of payment and that it contributes to asset turnover

of bank of Kigali.17.3 % agreed that the bank uses this platform to make electronic

transfers to other banks or to the clients. The bank’s capital adequacy means that the

52
amount of capital that the bank reserve to carter for the risk factors that helps reduce

default risk. Capital adequacy is evaluated depending on the ratio of owners’ equity

measured by the ratio of capital to risk weighted assets (CRAR). A solid capital base

enhances depositor confidence.

5.2.3. Electronic cards like ATMs and liquidity position of BK

The research findings also indicate that electronic payments such as ATM, electronic

cards have an impact on the liquidity position of bank of Kigali and 55.3% of the

respondents strongly agreed and 44.4% agreed that they commonly use electronic

payments and that might have an impact on liquidity positions. credit cards and ATM are

considered as the most used electronic payment and that may help the bank to control the

liquidity position. ATM machines have ceiling that the customers may not exceed in

terms of withdraws this helps banks to control the movement of cash so as not to fall into

liquid trap.

The electronic card payment in the form of an ATM connects a computer terminal,

documentation system and cash register in one unit, which allows customers to enter the

financial company's accounting system with all personal identification cards. number

(PIN) or by punching a special code number in a computer terminal connected to the

financial institution's computer register 24 hours a day.

5.2.4. Electronic cards and Bank Efficiency

The research revealed that electronic cards has an impact on the bank efficiency of bank

of Kigali and that electronic cards are commonly used. According to the study to the

study 49.4% of the respondents strongly agreed and 33.3% agreed that electronic cards

are commonly used by the customers and revealed that it has an impact on the efficiency

of the bank of the Bank. Electronic cards help customers not to take large sums of money

53
in cash this reduces the risk that customer funds may be stolen. the cards help the

customers and bank to reduce the risk associated with handling huge amount of cash.

Customers can shop anywhere, such as checking the account balance, checking accounts,

payment of invoices, electronic money transfer, updates and history and transfer of

account to account, etc.

The study was intended to evaluate researcher the extent to which electronic payment

models are used by his customers at the bank, and in relation to the issuance of the

electronic card payment system (ATM card, Visa card, etc.). The variable was averaged

1.06 and standard deviation 2.42, which means that most respondents said many

customers use electronic cards.

On the issue of mobile phone payment system very many clients have adopted this mode

of payment. According to the BNR report, the number of people using mobile money

payment has increased tremendously from the 2012 to 2018

Internet payment system is not really popular and majority of the respondents are not

certain that they are used by BK clients or not.

The adoption of electronic card payment systems by clients was also rated with the mean

of 3.42 and a heterogeneous standard deviation of1.350. This implies that majority of BK

clients do not often use electronic payment system and that is the reason why majority of

the respondents could not confirm with certainty the level at which BK clients are able to

use electronic card. As mentioned earlier, this is not a popular form of electronic payment

system since majority of the electronic cards being used currently are written and signed

by hand.

The researcher decided to examine the contributions of electronic payment in promoting

bank efficiency. It was observed that mmajority off the respondents stated that E-payment

system very effective in making deposits. clients use electronic payment even in in

54
deposit cash through, mobile banking, AMT machine, internet payment, pay direct and

visa or debit card transfer. The respondents further stated that e-payment is very effective

in withdrawing money as indicated by a mean of 1.25 and a heterogeneous standard

deviation of .969. This reduces the time going to the bank to queue in long lines. Such

transacts can be made at the comfort of your home and it only takes few minutes.

Checking bank balances as well as transferring or making payment are also rated to be

very effective while using electronic payment system as indicated above. Checking

balance another transaction performed by electronic banking where by clients can use

ATM, mobile banking and internet banking to check for their balance direct from the

bank and this can allow clients to make a decision on how much to deposit or withdraw.

Therefore, it can be concluded that electronic payment enhances efficiency of operations

since the clients can withdraw and deposit money and authorises the payment and check

bank balance.

The researcher sought to assess the respondent’s perception as to whether electronic

payment have impacted on the financial results of bank of Kigali. It was indicated that

most of the respondents stated that electronic card system like ATM cards, visa cards etc

has contributed very significantly to the performance of BK as evidenced by the mean

1.15 and standard deviation of .450.

5.3 Conclusion

In conclusion, indeed electronic payment system comes in various forms. This include

electronic card payment system, mobile phone payment system, Internet payment system,

electronic card payment systems and also Point of Sale (POS).

The above listed e-payment system have been used by bank clients extensively to

withdraw, deposit, exchange funds in between bank accounts within a very short period

of time. For instance, in mobile phone payment system very many clients have adopted

55
this mode of payment. The respondents further stated that e-payment is very effective in

withdrawing money. This reduces the time going to the bank to queue in long lines. Such

transacts can be made at the comfort of your home and it only takes few minutes.

Checking bank balances as well as transferring or making payment are also rated to be

very effective while using electronic payment system as indicated above. Checking

balance another transaction performed by electronic banking where by clients can use

ATM, mobile banking and internet banking to check for their balance direct from the

bank and this can allow clients to make a decision on how much to deposit or withdraw.

Therefore, it can be concluded that electronic banking enhances efficiency in bank

operations since clients can be able to withdraw and deposit money, authorises payment

and check account balance.

The above mentioned Electronic payment system has contributed significantly on

financial performance of banks in terms of amount of transactions done through the bank

through deposits, withdraws, bank balance charges obtained from client accessing their

account either, transfer commissions as well as payment charges in any POS transaction.

5.4 Recommendation

• The ATM should be distributed to several places so that they can be easily

accessed by customers for a fast and convenient service delivery and eventually

improve banking operations. At the same time, continuous maintenance must be

guaranteed to ensure reliability of service provision.

• The bank should subscribe to reliable internet providers to provide services

effectively and efficiently.

• Bank Management must establish National customer training on how to use

various commercial application for efficient bank operations for example the use

of VISA, online and Mobile banking, etc.

56
• The bank should continue upgrading its electronic banking technology to have

an effective and efficient service.

57
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